Is Madison Square Garden Sports Corp. (MSGS) A Good Stock To Buy?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Madison Square Garden Sports Corp. (NYSE:MSGS) and determine whether the smart money was really smart about this stock.

Is Madison Square Garden Sports Corp. (NYSE:MSGS) the right investment to pursue these days? Investors who are in the know were in a bullish mood. The number of long hedge fund bets moved up by 2 recently. Madison Square Garden Sports Corp. (NYSE:MSGS) was in 43 hedge funds’ portfolios at the end of June. The all time high for this statistics is 52. Our calculations also showed that MSGS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most stock holders, hedge funds are assumed to be unimportant, outdated investment tools of the past. While there are greater than 8000 funds trading today, We choose to focus on the upper echelon of this group, approximately 850 funds. These investment experts watch over most of all hedge funds’ total asset base, and by keeping track of their best picks, Insider Monkey has uncovered a number of investment strategies that have historically outrun the market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Clifton Robbins Blue Harbour

Clifton S. Robbins of Blue Harbour Group

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s take a peek at the new hedge fund action surrounding Madison Square Garden Sports Corp. (NYSE:MSGS).

What have hedge funds been doing with Madison Square Garden Sports Corp. (NYSE:MSGS)?

At the end of June, a total of 43 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the first quarter of 2020. On the other hand, there were a total of 50 hedge funds with a bullish position in MSGS a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Silver Lake Partners held the most valuable stake in Madison Square Garden Sports Corp. (NYSE:MSGS), which was worth $279.1 million at the end of the third quarter. On the second spot was Blue Harbour Group which amassed $122.7 million worth of shares. Long Pond Capital, GAMCO Investors, and D1 Capital Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Blue Harbour Group allocated the biggest weight to Madison Square Garden Sports Corp. (NYSE:MSGS), around 34.76% of its 13F portfolio. Silver Lake Partners is also relatively very bullish on the stock, earmarking 9.19 percent of its 13F equity portfolio to MSGS.

As industrywide interest jumped, key money managers have been driving this bullishness. D1 Capital Partners, managed by Daniel Sundheim, created the largest position in Madison Square Garden Sports Corp. (NYSE:MSGS). D1 Capital Partners had $71.9 million invested in the company at the end of the quarter. Marc Majzner’s Clearline Capital also made a $3.6 million investment in the stock during the quarter. The other funds with brand new MSGS positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Israel Englander’s Millennium Management, and Michael Gelband’s ExodusPoint Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Madison Square Garden Sports Corp. (NYSE:MSGS) but similarly valued. We will take a look at Affiliated Managers Group, Inc. (NYSE:AMG), Blackstone Mortgage Trust Inc (NYSE:BXMT), Carter’s, Inc. (NYSE:CRI), Allakos Inc. (NASDAQ:ALLK), Rexnord Corp (NYSE:RXN), ASGN Incorporated (NYSE:ASGN), and Companhia Brasileira de Distrib. (NYSE:CBD). This group of stocks’ market caps are closest to MSGS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AMG 27 355173 0
BXMT 24 160654 5
CRI 33 268651 10
ALLK 14 311817 2
RXN 27 348031 8
ASGN 13 73867 -6
CBD 6 19316 1
Average 20.6 219644 2.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.6 hedge funds with bullish positions and the average amount invested in these stocks was $220 million. That figure was $966 million in MSGS’s case. Carter’s, Inc. (NYSE:CRI) is the most popular stock in this table. On the other hand Companhia Brasileira de Distrib. (NYSE:CBD) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Madison Square Garden Sports Corp. (NYSE:MSGS) is more popular among hedge funds. Our overall hedge fund sentiment score for MSGS is 81.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Unfortunately MSGS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MSGS were disappointed as the stock returned 11.6% since the end of the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.